Singapore's Temasek Holdings, one of the world's largest sovereign wealth funds, said the size of its portfolio soared to a record high in the financial year ending March 2013, even as profits showed a slight dip.
At its annual earnings review on Thursday, the AAA-rated wealth fund said the value of its investments rose to 215 billion Singapore dollars ($168 billion) in the year, an 8.6 percent increase from the year before.
In the last financial year, Temasek made investments worth 20 billion Singapore dollars in several companies including Spanish oil company Repsol, Singapore-based agricultural commodities company Olam and German chemicals company Evonik.
However, the fund - headed by Ho Ching, the wife of the country's Prime Minister Lee Hsien Loong - reported net income that fell slightly to 10.6 billion Singapore dollars from 10.7 billion the year before, driven by lower contributions from companies in its portfolio.
"We cannot be completely divorced form the market. Seventy percent of our portfolio is listed, if the markets are in very negative territory, we can't run away from the fact that we would be impacted in that particular year. And we did feel the influence of the over the last two years," said Rohit Sipahimalani, Temasek's co-chief investment officer, at a press conference.
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Portfolio Exposure to Asia Dips
As of March 31, 2013, Temasek's holdings in Asia and Singapore accounted for 71 percent of the total portfolio, down from 72 percent the year before. Exposure to North America and Europe, meanwhile, rose to 12 percent from 11 percent the year earlier.
Within Asia, the fund said China accounted for 23 percent of its portfolio, down from 24 percent in the previous year.
In the mainland, Temasek has a sizable exposure to the country's banking sector. It disclosed that China Construction Bank was its second largest holding, after Singapore Telecommunications, accounting for 8 percent of its overall portfolio last fiscal year, slightly down from 10 percent the year before.
And, despite the tighter liquidity environment and the prospect of a rise in non-performing loans as the economy slows, the fund said it is still cautiously optimistic on the Chinese banking space.
Last week, the fund increased its holdings in Industrial and Commercial Bank of China to 8.07 percent with a purchase of $75 million in its Hong Kong-listed shares, according to Reuters.
"We recognize there are issues in China, (but) we look longer term. We're cautiously optimistic that we will get through this period and growth will return to more normal," Boon Sim, Head of Markets Group & President, Americas at Temasek, told CNBC, adding that the fund is not investing in banks blindly.
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"These are banks that are very well capitalized, so I would say even though there is clearly a situation in China, you can't just - with one brunch - paint all the banks," he added.
During the financial crisis, the state investor suffered heavy losses as a result of its stakes in Western banks including Bank of America and Barclays, which it sold off in phases.
— By CNBC's Ansuya Harjani